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Apple Economy

Apple’s China supply chain exposed

Kai Ryssdal Jan 26, 2012

Kai Ryssdal: If you were asked to pick the iconic American company right now, right at the top of most lists would be Apple. Once a fringe, cultish computer company — now maker of things that everybody wants.

It got that way with great design, an eye for perfection, and a whole lot of Chinese factory workers. Charles Duhigg has been writing about the economics of Apple’s supply chain in the New York Times this week. In a story that went up online yesterday, he told the story of a 22-year-old man name Lai Xiaodong and the job Mr. Lai got at FoxConn, one of Apple’s biggest suppliers.

Charles Duhigg: He was assigned to a room where they were sanding, polishing the iPad cases. As aluminum dust built up in the air from the polishing, it eventually got to a critical point where it exploded. Mr. Lai was killed along with three others, and dozens were injured.

Ryssdal: And the official response from Apple and from Foxconn on this was what?

Duhigg: Both of them said that they opened up investigations, although neither company has revealed any of the documents or any of the findings from when they sent folks in. Conditions in Chinese factories are harsh. They’re much harsher than they are in, for instance, the United States or any Western nation. And when I talk to former Apple employees, what they say is that if Apple and Amazon and Dell and Hewlett-Packard, if they all came in and they insisted that conditions be improved to where there are no safety hazards, Chinese manufacturers would have to comply. But the problem is that right now there’s not a lot of reward for doing so — particularly when insisting upon changes would probably slow down the pace of innovation significantly and would very likely raise costs for a number of those companies.

Ryssdal: Let me explore that pace of innovation point because that is at the core of the article that came out yesterday and the one that came out over the weekend as well. And that is how quickly companies expect manufacturers to be able to turn to get what consumers want. And you tell a great story about the glass in the iPhone and when Steve Jobs said ‘I want a glass screen, make it happen.’

Duhigg: Absolutely. And they were able to turn that around, overhaul their manufacturing process, and within 48 hours get these glass screens into workers’ hands and start producing finished iPhones because there’s this enormous flexibility. These factories can hire 3,000 people overnight. It’s an amazing scale.

Ryssdal: Well here comes the look-in-the-mirror question because there is demand issue that’s helping drive this whole thing.

Duhigg: Oh, there’s huge demand. Right? We did a national poll as part of this story and we asked people, first of all, where do you think Apple products are made? Most people who responded didn’t know that they were made overseas primarily or how much of them was made overseas. And then we asked: What’s the worst thing that you know Apple? 57 percent of people couldn’t think of anything negative about the company.

Ryssdal: Wow.

Duhigg: The No. 1 response at 14 percent was that their products are too expensive. Two percent of respondents mentioned overseas labor conditions.

Ryssdal: Play this out for me, then. If change is going to come, where is change going to come from?

Duhigg: Where change has to come from is it has to come from consumers starting to say, ‘Listen, I really care about where my product comes from. I’m willing to pay more for it if it’s built in a factory I can feel good about.’ And more importantly, ‘I’m willing to wait longer for a new version.’ We live in a time when there’s a brand-new device, it seems like, every couple of months. And they’re amazing and wonderful — but there’s a price to that.

Ryssdal: Charles Duhigg writing in the New York Times with David Barboza about Apple and the iEconomy. Charles, thanks a lot.

Duhigg: Kai, thanks so much for having me.

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